Sidelights

Eliot Spitzer won his bid to become governor of New York state in a 2006
election that marked a turning point for his fellow Democrats in both
Albany and in Washington. The governor-elect's victory at the polls
came thanks to his two terms as New York State attorney general, during
which his office utilized an archaic state law to prosecute misdeeds by
powerful Wall Street financial-services firms. In doing so, he became the
rare state-elected official to enjoy national name recognition as well as
"the single most powerful public official outside
Washington," noted
Fortune
's Peter Elkind in a 2005 profile.

Spitzer hails from a well-to-do New York City family with extensive
real-estate holdings. He was the third child born to Anne, a literature
professor, and Bernard, a real-estate developer of residential high-rise
properties in Manhattan. The Spitzer parents epitomized the quintessential
New York City success story: both were the children of Jewish immigrants
and raised in modest circumstances, and were living in a posh section of
the Bronx called Riverdale by the time Eliot joined siblings Daniel and
Emily in 1959. All three children attended Horace Mann, a private school
in Riverdale, where the future governor captained the high-school tennis
team and, like his siblings before him, earned excellent grades.

Spitzer's parents instilled a zeal to achieve as well as a strong
sense of social responsibility in their children. The trio were expected
to take turns leading the nightly dinner-table debate, and were raised
with the idea that because they were more fortunate than others in the
world, they should seek ways to
give back. During one of his summer college breaks, Spitzer traveled
through several southern states and took whatever day-laborer jobs he
could find, most of which were tough, dirty, and low-paying.
"I'd had a comfortable upbringing," he explained to
Time
reporter Adi Ignatius, "so I wanted to experience harder work, to
see the world from a different perspective."

Though he had a near-perfect Scholastic Aptitude Test (SAT) score, Spitzer
was turned down by his first college choice, Harvard, and enrolled at
Princeton instead. During his sophomore year he was elected student
government president, and after earning his degree in 1981 went on to
Harvard Law School. There he served as an editor on the prestigious
Harvard Law Review
and worked for one of his professors, celebrity defense-attorney Alan
Dershowitz, on the infamous Claus von Bulow case. Von Bulow was accused of
murdering his socialite wife, and Dershowitz's success in having
the original conviction overturned on appeal was the basis of a 1990
Hollywood film,
Reversal of Fortune
, which depicted the work that Dershowitz's team of Harvard law
students put in on the case. Spitzer, said Dershowitz, "was just
off-the-charts brilliant," reported
New York Times
journalist Danny Hakim. "The last thing anyone in my office
thought was that he was going to become a politician."

During his time at Harvard, Spitzer met fellow law school student Silda
Wall, and the two continued to date after both moved to New York City
after graduation. Wall, a North Carolina native who shared her future
husband's habit of putting in long hours at the office, joined a
top corporate law firm in the city, while Spitzer clerked for a U.S.
district court judge before joining Paul, Weiss, Rifkind, Wharton &
Garrison, another prestigious private firm. But Spitzer was unhappy
working as an associate in a large firm, and left to join the staff of
Manhattan District Attorney Robert M. Morgenthau. Within a few short years
he rose to head its labor-racketeering unit, which investigated ties
between organized crime and labor unions.

Spitzer's first brush with the media came in early 1992, when his
team's successful targeting of the Gambino crime family resulted in
an end to the decades-old hold the mobsters had had on trucking contracts
in the garment industry. Spitzer had devised a fake sweatshop to ensnare
the Gambino associates, put an undercover state trooper in charge of it,
and several months later managed to produce wiretapped conversations
"with them saying, 'Look, if you try to switch trucking
companies, we'll break your legs,'" Spitzer recounted
in an interview with Holly Brubach for
Vanity Fair
.

Spitzer returned briefly to private practice when he joined Skadden, Arps,
Slate, Meagher & Flom, but re-entered the spotlight when he entered
the race for New York state attorney general in 1994. A virtual unknown,
he spent heavily in the months leading up the Democratic primary, but
finished in fourth place. His opponents wondered publicly about the true
source of the funds that paid for the expensive political ads, and claimed
he was skirting campaign finance laws. Those charges would return four
years later when Spitzer ran once again for the job and made it past the
primary race this time. He admitted that in 1994 he had borrowed some of
the money, and that his father had then helped him repay the loan. Because
of this, Spitzer's Republican opponent, incumbent Dennis Vacco,
fought hard to portray him as a privileged scion but political novice who
was attempting to buy his way into office. Spitzer fought back and
returned the negative press, and squeaked past Vacco at the polls with a
margin of just 25,000 votes out of four million; Vacco demanded a recount
and did not concede the race until several weeks later.

Spitzer was sworn in as New York state's attorney general in
January of 1999. During his first term, Spitzer prosecuted power plants in
Ohio and other Midwestern states whose emissions, environmental studies
had shown, were actually being carried so far east that they were
polluting the skies above New York. His office sued the utility companies
who owned the plants under the terms of the Federal Clean Air Act, though
enforcement of this law was customarily the job of federal bodies such as
the Environmental Protection Agency.

Emboldened by the success, Spitzer soon realized that a little-known state
law called the Martin Act, which dated back to 1921, might also be of use.
The Martin Act gave the attorney general the power to subpoena witnesses
as well as documents from a company doing business in the state if his or
her office believed there was evidence of fraud. The Martin Act was rarely
invoked except in real-estate cases, but Spitzer deployed it against
several big Wall Street brokerage firms whose media-savvy analysts had
been publicly recommending stocks during the late 1990s dotcom boom; in
reality, associates at the firms privately reviled the stocks as
ridiculously bad investment opportunities. Spitzer traced a trail that
seemed to hint that these bigname brokerage firms promoted certain stocks
in return for winning the company's investment-banking business.

Spitzer subpoenaed e-mails from several companies, and Merrill Lynch was
the first to comply, sending over some 94,000 pages. Spitzer's
office
found one exchange between Merrill Lynch associates hinting that one
Internet company had chosen to use another investment bank for its
business, and in a retaliatory move, Merrill Lynch analysts had downgraded
its stock. The quid-pro-quo arrangement was said to have been a well-known
secret on Wall Street, but Spitzer fumed that ordinary investors had been
so baldly deceived by some of Merrill Lynch's star analysts, who
appeared frequently on television and in the print media to counsel the
general public about investment opportunities. Merrill Lynch quickly
settled once Spitzer made the incriminating e-mails public, as did several
other investment firms over the course of 2002.

Spitzer's crusade became known as the Global Settlement case of
2002, and turned him into the most hated man on Wall Street. He was even
derided in some conservative media outlets as an enemy of capitalism and
free-market competition. "There will always be apologists for the
powerful and politically connected who commit a crime," Spitzer
retorted to the criticism at a press conference, according to
Elkind's
Fortune
profile. The attorney general then reminded his audience that his
office's zeal had been aimed at ending actions that were
"costing real investors billions of dollars. Folks who were saving
50 bucks a week, putting it into the market into savings."

Not surprisingly, the Global Settlement issue made Spitzer a hero in the
eyes of the public, and also served to catapult him onto a national stage.
The case virtually secured his re-election bid for attorney general in
2002, which he won by a comfortable margin of votes. Several weeks later,
Time
magazine named him "Crusader of the Year" in its annual
recap of the biggest newsmakers of the past 12 months, repeating a new
title given by others to him as the new "sheriff of Wall
Street." His second term in office resulted in several more notable
battles against some of the world's most powerful financial
institutions, including a late trading scandal in which Spitzer's
office went after brokerage firms that handled mutual funds and allowed
some of their more elite clients, such as hedge funds, the privilege of
trading after the close of the market. In 2004, Spitzer went after former
New York Stock Exchange (NYSE) chair Dick Grasso, whose impressive salary
deal of $187.5 million had raised some eyebrows, since its generous terms
were agreed to by the members of NYSE board, who represented companies
that relied on the remaining in the good graces of both Grasso, as chair,
and the NYSE. That 2004 case served to deepen resentment against Spitzer
behind closed doors on Wall Street and in the boardrooms of corporate
America; editorial writers for the
Wall Street Journal
even began dubbing him the "Lord High New York
executioner."

Rumors that Spitzer's high-profile cases were merely preparation
for a larger public role had swirled around his name since 2002. Midway
through his second term, he surprised few with his announcement that he
would be seeking the Democratic nomination slot in New York's 2006
gubernatorial race. In the party primary in September of 2006, Spitzer
bested a Long Island office-holder, Tom Suozzi, and went on to win the
November race by one of the biggest margins in New York state electoral
history. He took nearly 70 percent of the vote, easily defeating
Republican challenger John Faso, and became the first democrat to win the
office since Mario M. Cuomo left office in 1995. Spitzer's running
mate was David Paterson, a state senator from Harlem, who became the first
African American ever elected to the lieutenant governor's office
in New York state.

Spitzer, who lives with his wife in one of his father's high-rise
buildings near Central Park, runs every morning in the park, and maintains
an exhausting schedule that often stretches past the 12-hour mark. Silda
Wall Spitzer left private practice to head a nonprofit Spitzer family
foundation that encourages schoolchildren to volunteer their time and
talents. With such an unusually high public profile for a state
officeholder, Spitzer is often mentioned as a possible contender for a
national leadership position, perhaps even the White House. For the next
four years, however, Spitzer was planning on fulfilling his campaign
slogan—"Day One, Everything Changes"—in Albany
come January of 2007. In his victory speech, he promised "a new
brand of politics—a break from the days when progress was measured
by the partisan points you scored or the opponents you beat,"
New York Sun
reporter Jacob Gershman quoted him as saying. "From here on out we
need a politics that binds us together, a politics that's
forward-looking, a politics that asks not what it's in it for me,
but always what's in it for us."

Sources

Fortune
, November 28, 2005, p. 86.

New York
, December 13, 2004.

New York Sun
, November 8, 2006.

New York Times
, October 12, 2006; October 15, 2006; November 8, 2006.

Time
, December 30, 2002, p. 64.

Vanity Fair
, January 2005, p. 116.

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